As a rule I only execute prisoners when I'm losing the battle. Otherwise I tend to hold on to them and send in my light cavalry to mop up as many routers as possible to gain more. The way I see it the benefits are thus:
Pros:
1) If the enemy pays the ransom: Money!
2) If the enemy pays the ransom they have to support a lot of battered units with low loyalty (possible civil war trigger)
3) If the enemy pays the ransom they may regain a general with one of the coward line of vices
4) If the enemy pays the ransom, they are weakened financially
5) If the enemy don't pay the ransom, loyalty will drop
Cons:
1) The enemy may pay up and regain a decent army to use against you again.
2) Your general will not gain one of the "butcher" line of dread boosting vices.
Also if you do execute prisoners you may actually be helping the AI out - this may not always be a bad thing - by removing low quality units and freeing up the AI faction's economy to train better ones. Remember that the AI cannot disband or retrain so this is a factor. Also the dread boosting vices are not much of a loss. Dread is a stat that only affects the loyalty of a province where that man is a governor, by improving loyalty. Apart from this it is only relevant to the faction leader - in the global sense - so it's not
that useful. It may be useful to get the butcher vice if you're struggling to hold down rebellious provinces, though I find it's better to rely on well trained spies, decent garissons and happiness boosting buildings for this.

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